By now, most all entrepreneurs are familiar with the most common mistakes that lead to business failure. There are, however, some lesser known mistakes that small business owners can make that can also lead to grievous results for the owner and his business.
1. Failure of the owner to take proper compensation. A small business owner will often make himself a martyr when it comes to his own compensation. Because owner draw is a discretionary expenditure, it’s usually the first item to be cut when things go south. Owners need to remember why they went into business. Plowing all the net income “back into the company” might make the cash flow look better — but it doesn’t get personal bills paid. You don’t want to draw the equivalent of minimum wage either. You’d be better off just getting a job. If your cash flow won’t support a significant owner draw by midway through the second year of its existence, then the feasibility of the business model needs to be questioned.
2. Inability to say “no” to a customer. Why would you want to say no to a customer? Some offers and deals are just not a good fit for your company. This is especially a consideration in contracting and retail. Areas such as capacity and target margin have to be considered. If you own a retail store, you should have already put careful consideration into your pricing. Don’t let customers take a “yard sale” approach and haggle with you. If you have priced your stock fairly, stick to your pricing. If a contract is too demanding or not profitable, don’t be afraid to pass. The consequences of accepting a bad offer or contract can often be disastrous.
3. Neglecting the improvement of the owner’s sales skills. Don’t think you need to be a salesman to own a business? Do you talk to people on the phone or in person? Well then, you are in sales — like it or not. Many entrepreneurs are good, knowledgeable workers, but fail to convey their knowledge in an effective sales pitch or presentation. It is not question of if, but when a business owner will be called upon to speak to a client or a group of people concerning his business. Presentation and clarity are key components in the sales process. Let’s face it, most of us weren’t “born salespeople.” That doesn’t mean we can’t work on improving this essential skill.
4. Failure of the owner to make himself unnecessary to operations. Everybody wants to feel critically important, but it is not a good long-term situation for a company to be overly dependent on the owner’s physical presence 100 percent of the time. At some point, an owner is going to need a sick day or have an emergency. If you own a restaurant, why would you want to slave away at the grill all day, then have to tend to management duties afterwards? Trying to be “superman” will lead to burnout. Hire good people, train them well, and let them make money for you.
Have a question for Mark Lankford of the Butler County Small Business Development Center? Email questions to firstname.lastname@example.org for possible inclusion in an upcoming column.